Justia Commercial Law Opinion Summaries

JTE, distributed products for Bimbo around Chicago under an agreement with no fixed duration that could be terminated in the event of a non-curable or untimely-cured breach. New York law governed all disputes. According to JTE, Bimbo began fabricating curable breaches in 2008 in a scheme to force JTE out as its distributor and install a less-costly distributor. Bimbo employees filed false reports of poor service and out-of-stock products in JTE’s distribution area and would sometimes remove products from store shelves, photograph the empty shelves as “proof” of a breach, and then return the products to their shelves. Once, a distributor caught a Bimbo manager in the act of fabricating a photograph. Bimbo assured JTE that this would never happen again. In 2011, Bimbo unilaterally terminated JTE’s agreement, citing the fabricated breaches, and forced JTE to sell its rights to new distributors. JTE claims that it did not learn about the scheme until 2013-2014. The district court dismissed JTE’s suit for breach of contract and tortious interference. The Seventh Circuit affirmed. Under the primary-purpose test, the agreement qualifies as a contract for the sale of goods, governed by the UCC’s four-year statute of limitations, not by the 10-year period for other written contracts. With respect to tortious interference, the court reasoned that JTE knew about the shelving incidents and should not have “slumber[ed] on [its] rights” until it determined the exact way in which it was harmed. View "Heiman v. Bimbo Foods Bakeries Distribution Co." on Justia Law

Empire a distributor of alcoholic beverages, is New York State’s exclusive distributor for popular brands like Johnnie Walker, Grey Goose, and Seagram’s Gin. Empire alleges that from 2008-2014, Reliable and (non‐party) RNDC, among Maryland’s largest liquor distributors, conspired with retail liquor stores in Cecil County, Maryland and New York City to smuggle liquor from Maryland to New York, in violation of New York liquor law. Empire sued Reliable and several Cecil County and New York retailers under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1961, alleging that their bootlegging directly harmed Empire “because every case of alcohol smuggled into New York from Maryland was a lost sale by New York’s authorized distributors.” The defendants argued that the smuggling operation did not directly cause Empire to lose sales and that Empire had not adequately alleged proximate cause under RICO. The district court dismissed the case. The Second Circuit affirmed. Empire failed to allege proximate cause adequately. Empire adequately alleged a smuggling scheme, satisfying the first element of wire fraud and satisfied the third element of wire fraud, alleging “dozens of specific wire communications allegedly made by defendants.” The Supreme Court, however, has suggested the need for skepticism “to claims brought by economic competitors” and New York State was a more direct victim of the smuggling operation. View "Empire Merchants, LLC v. Reliable Churchill, LLLP" on Justia Law

In this consolidated action, the Supreme Court held that the trial court did not abuse its discretion in ordering class certification.Plaintiffs, service station operators and franchised dealers for gasoline products supplied by Defendant, a wholesale supplier, commenced this putative class action alleging that the proposed class members had been overcharged. Defendant then commenced a separate action against one of the plaintiffs. In response, that plaintiff filed a counterclaim styled as a proposed class action that mirrored Plaintiffs’ complaint in the earlier action. The trial court solicited the two actions and then allowed the action to proceed as a class action. Defendant appealed from the orders certifying the class. The Supreme Court affirmed, holding that the trial court did not abuse its discretion in ordering class certification. View "Standard Petroleum Co. v. Faugno Acquisition, LLC" on Justia Law

Sabafon, a telephone company based wanted cards to provide prepaid minutes of phone use plus a game of chance. Both the number for phone time and the symbols representing prizes were to be covered by a scratch-off coating. Emirat promised to supply Sabafon with 25 million high-security scratch-off cards. Emirat contracted with High Point Printing, which, in turn, engaged WS to do the work. Emirat paid High Point about $700,000. Three batches of the cards tested as adequately secure, but the testing company indicated that, under some circumstances, the digits and game symbols could be seen on some cards in a fourth batch. Emirat rejected the whole print run. High Point was out of business. Emirat sued WS, arguing that its settlement agreement with WS, after an initial run of cards was not correctly shipped, subjects WS to Emirat's contract with High Point. The Seventh Circuit affirmed summary judgment for WS, noting that with a sufficiently high-tech approach, any security can be compromised, but no one will spend $1,000 to break the security of a card promising $50 worth of phone time. The contract is silent and does not promise any level of security, except through the possibility that usages of trade are read into every contract for scratch-off cards. Even if WS assumed High Point’s promises, neither promised any higher level of security than was provided. WS’s cards passed normal security tests repeatedly. View "Emirat AG v. WS Packaging Group, Inc." on Justia Law

Plaintiffs, licensed taxi and limousine operators, sued under 42 U.S.C. 1983, challenging an agreement between Newark and Uber as violating their rights under the Takings, Due Process, and Equal Protection Clauses. In order to operate in Newark without taxi medallions or commercial driver’s licenses, setting its own rates, Uber agreed to pay the city $1 million per year for 10 years; to provide $1.5 million in liability insurance for each of its drivers; to have a third-party provider conduct background checks on its drivers. The Third Circuit affirmed the dismissal of the suit. The agreement places the plaintiffs in an “undoubtedly difficult position” but the situation cannot be remedied through constitutional claims. Even if plaintiffs have a legally cognizable property interest in the medallions themselves, they remain in possession of and able to use their taxi medallions to conduct business. The decrease in the market value of the medallions is not sufficient to constitute a cognizable property interest necessary to state a claim under the Takings Clause. The city controls the number of medallions in circulation and maintains the ability to flood the market with medallions. With respect to equal protection, it is rational for the city to determine that customers require greater protections before accepting a ride from a taxi on the street than before accepting a ride where they are given the relevant information in advance. View "Newark Cab Association v. City of Newark" on Justia Law

In 2010, BRC and Continental entered into a five‐year agreement. Continental was to sell to BRC approximately 1.8 million pounds of prime carbon black, annually, in approximately equal monthly quantities, with baseline prices for three grades, including N762, “to remain firm throughout the term.” Continental could meet any better offers that BRC received. Shipments continued regularly until March 2011, when demand began to exceed Continental’s production ability. Continental notified its buyers that N762 would be unavailable in May. BRC nonetheless placed an order. The parties dispute the nature of subsequent communications. Continental neither confirmed BRC’s order nor shipped N762. BRC demanded immediate shipment. Continental responded that it did “not have N762 available.” BRC purchased some N762 from another supplier at a higher price. Days later, Continental offered to ship N762 at price increases, which BRC refused to pay. After discussions, Continental sent an email stating that Continental would continue "shipping timely at the contract prices, and would not cut off supply” and would “ship one car next week.” Continental emphasized that the Agreement required it to supply about 150,000 pounds per month and that it already had shipped approximately 300,000 pounds per month. Continental shipped one railcar. Within a week, Continental emailed BRC seeking to increase the baseline prices and to accelerate payment terms.BRC sued, seeking its costs in purchasing from another supplier following Continental’s alleged repudiation. The Seventh Circuit rejected the characterization of the agreement as a requirements contract. On remand, BRC, without amending its complaint, pursued the alternative theory that the agreement is for a fixed-amount supply. The Seventh Circuit reversed summary judgment and remanded, finding the agreement, supported by mutuality and consideration, enforceable. The agreement imposed sufficiently definite obligations on both parties and was not an unenforceable "buyer's option." BRC can proceed in characterizing the contract as for a fixed amount. BRC altered only its legal characterization; its factual theory remained constant and Continental is not prejudiced by the change. View "BRC Rubber & Plastics, Inc. v. Continental Carbon Co." on Justia Law

Littlejohn sought to sue Costco, the California Board of Equalization, and Abbott to recover sales tax on purchases of Abbott’s product Ensure. Littlejohn alleged that Ensure is properly categorized as a food; no sales tax was actually due on his purchases; Costco was under no obligation to pay and should not have paid sales tax on its sales of Ensure. The complaint alleged that during the period in question Ensure was classified as a food product exempt from sales tax, not a nutritional supplement. Littlejohn based his claim on a 1974 California Supreme Court decision, Javor. The trial court concluded that the judicially noticed documents in the record showed the Board had not resolved the question of whether Ensure was nontaxable during the relevant period.. The court held that the documents were entitled to deference, but did not have the same force of law as Board regulations and were not binding. The court of appeal affirmed, reasoning that the case does not involve allegations of unique circumstances showing the Board has concluded consumers are owed refunds for taxes paid on sales of Ensure. A Javor remedy should be limited to the unique circumstances where the plaintiff shows that the state has been unjustly enriched by the overpayment of sales tax, and the Board concurs that the circumstances warrant refunds. View "Littlejohn v. Costco Wholesale Corp." on Justia Law

The Amex credit card companies use a two-sided transaction platform to serve cardholders and merchants. Unlike traditional markets, two-sided platforms exhibit “indirect network effects,” because the value of the platform to one group depends on how many members of another group participate. Two-sided platforms must take these effects into account before making a change in price on either side, or they risk creating a feedback loop of declining demand. Visa and MasterCard have structural advantages over Amex. Amex focuses on cardholder spending rather than cardholder lending. To encourage cardholder spending, Amex provides better rewards than the other credit-card companies. Amex continually invests in its cardholder rewards program and must charge merchants higher fees than its rivals. To avoid higher fees, merchants sometimes attempt to dissuade cardholders from using Amex cards (steering). Amex places anti-steering provisions in its contracts with merchants.The Supreme Court affirmed the Second Circuit in rejecting claims that Amex violated section 1 of the Sherman Antitrust Act, which prohibits "unreasonable restraints” of trade. Applying the "rule of reason" three-step burden-shifting framework, the Court concluded the plaintiffs did not establish that Amex’s anti-steering provisions have a substantial anticompetitive effect that harms consumers in the relevant market. Evidence of a price increase on one side of a two-sided transaction platform cannot, by itself, demonstrate an anticompetitive exercise of market power; plaintiffs must prove that Amex’s anti-steering provisions increased the cost of credit-card transactions above a competitive level, reduced the number of credit-card transactions, or otherwise stifled competition. They offered no evidence that the price of credit-card transactions was higher than the price one would expect in a competitive market. Amex’s increased merchant fees reflect increases in the value of its services and the cost of its transactions, not an ability to charge above a competitive price. The Court noted that Visa and MasterCard’s merchant fees have continued to increase, even where Amex is not accepted. The market actually experienced expanding output and improved quality. View "Ohio v. American Express Co." on Justia Law

Defendants are the nation’s largest distributors of pre-filled propane exchange tanks, which come in a standard size. Before 2008, Defendants filled the tanks with 17 pounds of propane. In 2008, due to rising prices, Defendants reduced the amount in each tato 15 pounds, maintaining the same price. Plaintiffs, indirect purchasers, who bought tanks from retailers, claimed this effectively raised the price. In 2009, plaintiffs filed a class action alleging conspiracy under the Sherman Act. Plaintiffs settled with both Defendants. In 2014, the Federal Trade Commission issued a complaint against Defendants, which settled in 2015 by consent orders, for conspiring to artificially inflate tank prices. In 2014, another group of indirect purchasers (Ortiz) brought a class action against Defendants, alleging: “Despite their settlements, Defendants continued to conspire, and ... maintained their illegally agreed-upon fill levels, preserving the unlawfully inflated prices." The Ortiz suit became part of a multidistrict proceeding that included similar allegations by direct purchasers (who bought tanks directly from Defendants for resale). The Eighth Circuit reversed the dismissal of the direct-purchaser suit as time-barred, holding that each sale in a price-fixing conspiracy starts the statutory period running again. The court subsequently held that the indirect purchasers inadequately pled an injury-in-fact and lack standing to pursue an injunction to increase the fill levels of the tanks and may not seek disgorgement of profits. View "Ortiz v. Ferrellgas Partners, L.P." on Justia Law

Many states tax the retail sales of goods and services in the state. Sellers are required to collect and remit the tax; if they do not in-state consumers are responsible for paying a use tax at the same rate. Under earlier Supreme Court decisions, states could not require a business that had no physical presence in the state to collect its sales tax. Consumer compliance rates are low; it is estimated that South Dakota lost $48-$58 million annually. South Dakota enacted a law requiring out-of-state sellers to collect and remit sales tax, covering only sellers that annually deliver more than $100,000 of goods or services into the state or engage in 200 or more separate transactions for the delivery of goods or services into the state. State courts found the Act unconstitutional. The Supreme Court vacated, overruling the physical presence rule established by its decisions in Quill (1992), and National Bellas Hess (1967). That rule gave out-of-state sellers an advantage and each year becomes further removed from economic reality and results in significant revenue losses to the states. A business need not have a physical presence in a state to satisfy the demands of due process. The Commerce Clause requires “a sensitive, case-by-case analysis of purposes and effects,” to protect against any undue burden on interstate commerce, taking into consideration the small businesses, startups, or others who engage in commerce across state lines. Without the physical presence test, the first inquiry is whether the tax applies to an activity with a substantial nexus with the taxing state. Here, the nexus is sufficient. Any remaining Commerce Clause concerns may be addressed on remand. View "South Dakota v. Wayfair, Inc." on Justia Law